Cut­ting cor­po­rate income tax on for­eign earn­ings puts com­pa­nies that keep their pro­duc­tion in Amer­ica at a com­pet­i­tive dis­ad­van­tage and encour­ages the con­tin­ued hol­low­ing out of the Amer­i­can economy.

The sub­sidy for mov­ing pro­duc­tion over­seas has been euphemisti­cally called a “repa­tri­a­tion tax hol­i­day” but the only peo­ple who are going to get a hol­i­day are unem­ployed Amer­i­cans whose jobs will move over­seas. [read full story]

The Fed­eral Reserve is putting its future at risk by ignor­ing its own likely finan­cial results when it raises inter­est rates. Sim­ply put, ris­ing inter­est rates will hurt the Fed by mak­ing inter­est costs higher and asset val­ues lower.

While the Fed isn’t like any other bank in Amer­ica, it is still sub­ject to the immutable rules of math and inter­est rate risk. If the Fed starts to earn less on its invest­ments than it pays in inter­est on its deposits, it will lose money.

That is exactly what the Fed is fac­ing when inter­est rates rise — that it will pay more for deposits than it earns on its investments.

Taken in iso­la­tion the Fed’s bal­ance sheet looks more like an over­lever­aged hedge fund than a shin­ing exam­ple of pru­dent risk man­age­ment. The Fed has almost no cap­i­tal to back up its big macro bet on inter­est rates and the shape of the yield curve. Higher inter­est rates or an inverted yield curve where long-term assets yield less than short-term assets will cause prob­lems. [read full story]

Please explain your Medicare plan to me and my wife. We are in our early fifties and are con­cerned about how your changes to Medicare will affect us. We know that Wash­ing­ton can seem dis­con­nected from the real world but, for peo­ple of our age, your plan to do away with Medicare is very real.

Get­ting rid of Medicare feels like a free mar­kets exper­i­ment to us and nei­ther of us wants to be a “lab rat” for a social and eco­nomic exper­i­ment gone awry. Lab rats are usu­ally expend­able and we don’t want to be part of a dis­carded gen­er­a­tion. [read full story]

The finan­cial reform leg­is­la­tion that passed the House last week doesn’t fix the deriv­a­tives mar­ket but there is still time to make it right. The Sen­ate hasn’t passed its ver­sion of the bill and all Sen­a­tors need to do is include a pro­vi­sion stop­ping the Fed­eral gov­ern­ment from pre­vent­ing enforce­ment of state and local crim­i­nal […] [read full story]

The U.S. econ­omy is going to be sick until job growth returns and unem­ploy­ment is sig­nif­i­cantly reduced. Pres­i­dent Obama’s eco­nomic team doesn’t seem to know how to stim­u­late jobs growth and what they have tried so far isn’t work­ing very well. While Obama’s pol­icy seems to have stopped jobs from dis­ap­pear­ing, that is very dif­fer­ent […] [read full story]

On Mon­day the Wall Street Jour­nal ran an arti­cle that described the end of the golden era for oil refin­ers. It is a great arti­cle that, unfor­tu­nately, was pub­lished many years too late to be con­sid­ered news. Just as grav­ity is a force that brings all objects to earth, pub­lic pol­icy that destroys the demand […] [read full story]

Con­sumer lenders that out­source their credit deci­sions to con­sumer credit rat­ing agen­cies aren’t learn­ing from past mis­takes. By now lenders should have noticed that blind reliance on credit scores doesn’t work. Even so, most lenders con­tinue to dis­re­gard good under­writ­ing fun­da­men­tals and then can’t fig­ure out why they con­tinue to have bad credit per­for­mance. It’s […] [read full story]

I have received a big response to my recent arti­cle about credit card bills and whether or not con­sumers are being over­charged. A lot of frus­trated read­ers have pri­vately e-mailed me with their own very strong over­charg­ing suspicions.

For­tu­nately, the credit card over­charg­ing prob­lem can be fixed with sim­ple solu­tions that can be imple­mented imme­di­ately. Every day gram­mar school kids learn three basic lessons which if applied to bank credit card billing will instantly solve the prob­lem. The three lessons are…

Show your work
No free do overs
What’s good for the goose is good for the gan­der. [read full story]

The entire debate about the reg­u­la­tion of deriv­a­tives con­tracts takes on a new mean­ing in light of the OCC’s Quar­terly Report on Bank Trad­ing and Deriv­a­tives Activ­i­ties, Sec­ond Quar­ter 2009. The OCC (Office of the Comp­trol­ler of the Cur­rency) pub­lishes all sorts of inter­est­ing reports and hand­books that are largely over­looked by the media. And, the Deriv­a­tives Report is one of those OCC reports that almost no one seems to look at or care about. [read full story]

The U.S. econ­omy has a long way to go before the eco­nomic recov­ery will be either sus­tain­able or robust. Mon­e­tary indi­ca­tors don’t look good and are once again get­ting worse. I am con­cerned that the finan­cial sys­tem hasn’t recov­ered enough for the Fed­eral Reserve to with­draw from its pro­gram of quan­ti­ta­tive eas­ing. While most of the […] [read full story]